Where's
Pea? By William Cate[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
The Shell Game is alive and well in U.S. Stock Markets. It operates on a reporting loophole in GAAP (Generally Accepted Accounting Principles). The potential victims are investment funds, angel investors and public. While U.S. Securities and Exchange Commission (SEC) has been aware of sting for over a year, they have done nothing to stop it. It's been successfully run from New York Stock Exchange (NYSE) to Over-the-Counter Market. Its use is growing because regulators ignore it.
The Audit Loophole
The loophole is rule for reporting a consolidated audit in a public company's annual filing with SEC. The rule holds that any private company in which public company holds at least 51% of equity must be included in public company's audit. The problem with rule is that private company's revenues and profits are easily confused with public company's lack of revenues and profits. And, non-U.S. financial service firms structuring these public company filings ensure that investors in public company have no access to private company asset when swindlers elect to repossess private company. It's a win situation for overseas financial service firms. They get profitable, private company and whatever profit they can make from sale of insider shares. The American investment community gets shaft. The concept of giving investing public shaft was basis for 1989 Forbes claim that Vancouver was "Scam Capital of World." The 21st Century winning of this award should be Hong Kong.
How This Swindle Works
There is a public company without revenues or profits. If it were audited, shares would be worth nothing because public company is without cash producing assets or income. The only "asset" public company claims is at least a 51% ownership in a private tax haven corporation. The preferred tax haven is British Virgin Islands (BVI). The private tax haven Corporation also lacks revenues or profits. If it were audited, it would be without cash producing assets or income. The only "asset" BVI corporation owns is at least a 51% equity interest in a private operating company, usually in People's Republic of China (PRC). The American public company's audit is limited to private PRC's company assets, income and profits. There is no mention of BVI private tax haven Corporation or US Public company in audit. The consolidated audit only covers private PRC Company.
